Numbers Numbers. Taken as a snapshot, corporations are doomed. They are profitless and the current situation cannot continue

Gaius · 2024-08-22T12:23:25.052Z

The Bank of Amsterdam, the world’s first true central bank was established in 1609.
→ It was followed shortly by Tulip Mania, which peaked in 1637.

The Bank of England, Britain’s first central bank, was established in 1694…
→ It was followed shortly by the South Sea Bubble which engulfed many British stocks, most notably the South Sea Company.

The Federal Reserve System came into existence on December 23, 1913.
→ It was followed shortly by the roaring 20s and the crash of '29.
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Market exuberance is a very very poor indicator of economic health
and an even-poorer indicator of future market exuberance.

Gaius · 2024-08-22T13:14:50.165Z

biggestal99:

. . . the economy still churning out growth quarter after quarter.

Allan

(pardon the caps they are added for emphasis not for yelling)
the economy is still churning out CONSUMPTION growth quarter after quarter.

(GDP is not the economy it is a measure of the economy, just like forehead temperature or appetite are not health they are measures of health)

Gaius · 2024-08-22T13:17:18.139Z

biggestal99:

even @Samm and his bond holdings are doing terrific.

you get 5% back and inflation is 2.9%

do the math.

Allan

And who pays?
There is no magic wand that pays interest out of a bag of tricks. It comes from somewhere. Bonds are literally transfers of future wealth and income into the present.

Samm · 2024-08-22T23:37:53.649Z

biggestal99:

biggestal99:

i mean one would hauve thought a recession would happened by now.
yet here is the economy still churning out growth quarter after quarter.

Allan

even @Samm and his bond holdings are doing terrific.

you get 5% back and inflation is 2.9%

do the math.

Your interpretation of terrific is pathetic. My portfolio was at ~8% with inflation under 2% when Trump was President. What would you call that?

biggestal99 · 2024-08-23T09:01:56.817Z

Samm:

Your interpretation of terrific is pathetic

are you not getting a 5% yield from your bonds now? and inflation is 2.9%

isnt that good for you?

Allan

Gaius · 2024-08-23T09:26:01.551Z

An investor who bought all his bonds in 2010 is making less than 4% on any of them.

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An investor who bought them all yesterday is making under 4% on anything 2 years or longer.

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Note:

The average inflation rate in the United States over the past 10 years has been approximately 2.65%
The current inflation rate in the US is 2.9%, down slightly compared to 3% for the previous month.
The core inflation rate dropped to 3.2% in Jul 2024 from 3.3% in Jun.

SOURCE of charts:

ustreasuryyieldcurve.com

US Treasury Yield Curve

An app for exploring historic interest rates

SOURCE of notes:

finder.com – 23 Aug 22

United States Inflation Rate (CPI) Statistics - 1948 to August 2024

The current US inflation rate is 2.9%, compared to 3% last month. The next inflation report is scheduled for August 14, 2024, at 8:30 a.m. ET.

Est. reading time: 6 minutes

Samm · 2024-08-23T09:29:29.892Z

biggestal99:

Samm:

Your interpretation of terrific is pathetic

are you not getting a 5% yield from your bonds now? and inflation is 2.9%

isnt that good for you?

Sure. Anything over inflation is good compared to a return less than inflation (which it has been for most of the Biden administration) but it’s far from terrific.

biggestal99 · 2024-08-23T09:40:26.220Z

Gaius:

An investor who bought them all yesterday is making under 4% on anything 2 years or longer

short term bonds are yielding a little over 5%

which is a nice return.

the one i stick my excess cash in (JPST) is yielding 5.26% with. nice up arrow.

Allan

Gaius · 2024-08-23T09:48:59.506Z

biggestal99:

short term bonds are yielding a little over 5%

That’s right anyone who held their life savings elsewhere, (stocks, actual cash crypto) but then a short time ago dumped it all and moved it all to short term bonds is now making 5%.

Which is very very very different than saying “Bond investors are doing well. Anyone who was in the 50s and moved into bonds a few years ago made 5%.”

biggestal99 · 2024-08-23T10:36:24.814Z

Gaius:

That’s right anyone who held their life savings elsewhere, (stocks, actual cash crypto) but then a short time ago dumped it all and moved it all to short term bonds is now making 5%.

Which is very very very different than saying “Bond investors are doing well. Anyone who was in the 50s and moved into bonds a few years ago made 5%.”

any investor needs luck sometimes. i saw the yield and with one of your famous up arrow and said that is the place for cash for me. now of course what goes up will have to go down, i will ride this puppy until i see negative signs.

Allan

biggestal99 · 2024-08-23T10:39:36.631Z

biggestal99:

any investor needs luck sometimes. i saw the yield and with one of your famous up arrow and said that is the place for cash for me. now of course what goes up will have to go down, i will ride this puppy until i see negative signs.

Allan

basically as an investor, you have to be flexible and make money when the opportunity presents itself.

Allan

Gaius · 2024-08-23T12:29:26.721Z

biggestal99:

biggestal99:

any investor needs luck sometimes. i saw the yield and with one of your famous up arrow and said that is the place for cash for me. now of course what goes up will have to go down, i will ride this puppy until i see negative signs.

Allan

basically as an investor, you have to be flexible and make money when the opportunity presents itself.

Allan

Which would explain why Warren Buffett, who invests only bullishly, and normally holds his investments for a VERY long time, dumped half his Apple stock and is 50% cash and bonds as of his latest quarterly report.

Impenitent · 2024-08-23T12:42:41.668Z

isn’t the underlying problem not that prices are rising, but the value of the currency in which the items are purchased is falling?

biggestal99 · 2024-08-23T12:47:30.008Z

Impenitent:

isn’t the underlying problem not that prices are rising, but the value of the currency in which the items are purchased is falling?

the dollar is low right now. here an article that might help.

bonds think there is a problem, while stocks are flying high

https://www.marketwatch.com/story/stocks-and-bonds-are-sending-conflicting-messages-about-where-economy-is-heading-next-d6bbd199?mod=mw_quote_news

Allan

Gaius · 2024-08-23T13:02:34.557Z

Impenitent:

isn’t the underlying problem not that prices are rising, but the value of the currency in which the items are purchased is falling?

That is a related problem, but not the cause (nor a fuller way of explaining it)

What really is happening is:
Borrowing money costs over 5.09%.
Businesses are making just 4.66%.

Wanna open a pizza shop (or start a pod cast, or a bitcoin miner or an AI company?)
For every $100k you sink into the business you will make $4,660 but you have to pay $5,090.

It’s part of why Powell is under pressure to lower rates.
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Some businesses are just weeds. They should have never been opened. The only way they can survive is if Powell feeds them and waters them via lower rates.

Free market says: “They are weeds and they should be allowed to die. Heck that will even help the legit businesses.”

Keynesians say: “We must preserve the crap. In fact we want more crap. We must lower rates to subsidize and sustain every idiotic business decision ever made because, on paper that’s what makes it look like the economy is growing.”

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Impenitent · 2024-08-23T14:04:11.982Z

Keynesian crap… when several crap companies close - does that cause a shock to the system or just to those crap companies… and if enough crap companies close, wouldn’t that be a good thing? and who lets the crap companies start in the first place? growing piles of crap masquerading as legitimate business would make the market stink… I don’t know…

Gaius · 2024-08-23T14:18:17.496Z

When money was free,
everyone and their brother opened a business,
and legitimate businesses expanded far beyond the sustainable rate.

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A lot of weeds were created.
It should not be US policy to feed and water the weeds.

Impenitent · 2024-08-23T14:42:54.220Z

expanding until unsustainability…

balloons should never wish for over inflation…

a fool and his money…

Gaius · 2024-08-24T03:48:11.296Z

Gold and the S&P have been moving in tandem since (roughly) January.

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When the stock market and the anti-stock market move in tandem well, it obviously does not mean the underlying producer/employers are doing well.

It means people are moving that big pile of cash off the sidelines and betting for and against the market in roughly equivalent ways.

Samm · 2024-08-24T05:53:30.456Z

biggestal99:

Gaius:

An investor who bought them all yesterday is making under 4% on anything 2 years or longer

short term bonds are yielding a little over 5%

which is a nice return.

the one i stick my excess cash in (JPST) is yielding 5.26% with. nice up arrow.

No, not a nice return, an okay return. My portfolio was yielding 8-10% while Trump was in office until COVID blew the doors off. And inflation averaged about 1.5% over the same period. That was a nice return.